United States: Blow Browse: University Patents Now Immune To Inter Partes Review: Will Business Come Calling?

State colleges and universities recently received a potential
increase in the value of their patent portfolios in the form of a
ruling from the Patent Trial and Appeal Board (PTAB).

The January 25 decision confirmed that state sovereign immunity
applies to patents held by state universities, barring use of the
increasingly popular inter partes review (IPR) process to
challenge those patents.

As a result, a large swath of higher education entities has
apparently been spared from IPRs. This makes them a potentially
attractive option for non-governmental businesses that are still
vulnerable to IPRs and may be interested in shielding their patents
from invalidity determinations. Already bustling university tech
transfer offices may get even busier this year.

Background

With the rise of patent troll litigation, the America Invents
Act's administrative inter partes review (IPR)
proceedings have become an important means for fighting aggressive
patent holders. While patent troll litigation has decreased in
frequency, inter partes reviews have remained an
important tool for aggressively and proactively challenge
competitor patents.

The PTAB's decision in Covidien LP v. University of
Florida Research Foundation Incorporated, however, may have a
serious impact on those administrative proceedings.

The case began when the University of Florida Research
Foundation Inc. (UFRF), the licensing division at the University of
Florida, brought a state court action against Covidien, the
licensee of the patent-at-issue, which related to computer systems
that manage health care data. The suit alleged a breach of their
agreement based on Covidien refusing to pay royalties for products
they believed did not fall under the license or patent.

Covidien, having been purchased by Medtronic, counterclaimed,
seeking a declaratory judgment of non-infringement, then
subsequently and successfully petitioned to have the case removed
to U.S. District Court. Covidien/Medtronic concurrently filed three
separate petitions for IPR with the PTAB, challenging the validity
of the UFRF patents at issue. In response to the counterclaims,
UFRF argued that under the American Invents Act, they were
"entitled to Eleventh Amendment immunity from [Covidien's]
declaratory judgment counterclaim in the federal court." The
district court agreed with UFRF's argument, and the case was
remanded to state court.

In the IPRs, UFRF requested permission from the PTAB to file a
motion to dismiss on the basis of sovereign immunity. The PTAB
agreed to hear arguments. In its final decision, the PTAB held that
11th Amendment state sovereign immunity applied to the University
of Florida, as a public state university and "arm" of the
state of Florida.

In setting this standard, the PTAB noted that IPRs have
"considerable resemblance" to litigation in district
courts, and as such, Covidien (and purchasing company Medtronic)
had no basis for sustaining a petition with the PTAB to challenge
UFRF's patents.

The PTAB relied heavily on the similarities between IPR
proceedings and civil litigation, finding unpersuasive
Covidien's arguments against applying sovereign immunity in
IPRs. They noted that there was no evidence that Congress intended
to remove sovereign immunity for states during IPR proceedings. The
PTAB also noted that the district court, in dismissing
Covidien's counterclaims, said that "sovereign immunity
applies regardless of whether a private plaintiff's suit is for
monetary damages or some other type of relief."

What's next?

This decision, which surprised many in the IP arena, could
potentially halt any current IPR proceedings involving patent
owners connected to state university systems. A search of pending
IPR cases revealed only a handful of cases with a respondent that
appeared to be a state university or college; but that doesn't
include other respondents that may be affiliated with state
university or college through other means.

In fact, more and more colleges and universities are becoming
active in the acquisition, licencing, and enforcement of patents.
The Covidien ruling may substantially increase the value
of patents held by state universities and their licensing arms, and
encourage businesses to seek out new relationships with colleges
and universities.

Before pursing such affiliations, both higher education and
outside businesses should consider that a decision with such major
potential repercussions has the potential for itself being
reviewed. U.S. district courts may want to weigh in on this issue,
potentially resulting in turmoil unless and until a final decision
is made by the Court of Appeals for the Federal Circuit, the U.S.
Supreme Court or even potential legislation directed to this
issue.

For physicians considering patents, there are some initial issues to address and then a comprehensive patent strategy to develop before going down the path toward filing an application. Once your patent strategy is in place, you can turn your attention to your patent application

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